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Japanese Fashion Sector Unwilling to Establish Direct Supply Chain

Despite the clear cost benefits, many Japanese apparel importers and distributors are more than happy to leave sourcing and production to third-party intermediaries, according to exhibitors at the recently-staged Tokyo Fashion World event.

Photo: The Mongolia Pavilion: Making a play for China’s lost garment production business.
The Mongolia Pavilion: Making a play for China's lost garment production business.
Photo: The Mongolia Pavilion: Making a play for China’s lost garment production business.
The Mongolia Pavilion: Making a play for China's lost garment production business.

Tokyo's fashion fairs have undergone something of a shake-up in recent years. The catalyst for much of this change was the 2014 launch of the twice-yearly Tokyo Fashion World (TFW) show. Set up to challenge the dominance of the Senken Shimbun-organised International Fashion Fair (IFF), the event has enjoyed modest but steady growth over the past three years.

This year, on the third day of the show at least, it seemed a little quiet. This may, however, have been on account of the looming reboot of the IFF and its new partnership with Magic, one of the largest US apparel and accessories trade shows. Despite appearances to the contrary, however, TFW's organisers maintained that numbers were actually up this year.

One indisputable thing, though, was that Japan remains an attractive fashion market, with the April event delivering more overseas participants than ever before. Overall, there were 70% more international exhibitors than at the same event last year, accounting for some 57% of the total number of companies taking space. In other notable developments, a greater number of small, flexible manufacturers – typically geared to lower production runs – were in attendance, as well as a fair representation of companies happy to work on an OEM basis while also nurturing their own brands.

It was also apparent that rising labour costs were still forcing many companies to relocate their production to cheaper sites, while continuing price pressure was driving some brands down-market in order to stay competitive. In terms of customer demographics, age remained the defining factor, with older customers willing – and capable of – spending a lot more than younger ones.

In terms of national pavilions, both Indonesia and Mongolia had a significant presence, a sign that the two are keen to move more into manufacturing as wage hikes in China take their toll. Perhaps remarkably, though, few Japanese importers or distributors seemed keen to set up their own direct supply chains, apparently preferring to leave that to intermediaries from other countries, including China.

One mainland business clearly keen to take advantage of this was the Suzhou Great Wall International Trading Company. With robust manufacturing links to Bangladesh, it had made the trip to Tokyo specifically to drum up OEM business.

Explaining the company's proposition, Director Steven Zhang said: "Workers in Bangladesh are very cheap and cost effective, which is why we have based our manufacturing operation there. These days, in China, a typical worker is paid US$700-800 a month, while in Bangladesh it can be as low as $100. While efficiency is a little bit lower – probably only around 70% of the mainland norm – on balance, it's a very competitive labour market."

As the Chinese garment industry has to compete for labour against the country's high-tech and service sectors, this has pushed up wages and forced many companies to relocate their manufacturing to lower-cost regions. While this doesn't explain why Japanese companies aren't doing this on their own behalf, Zhang offered some insights.

He said: "Firstly, the cost for a Japanese company to send an expert abroad is quite prohibitive. Secondly, Japan is the world's third-largest consumer garment market, so local trading companies don't see the need to spend money on sending teams abroad, especially to underdeveloped countries.

"For us, though, the process of identifying cheaper labour markets never ends. After Bangladesh, we are now considering setting up in Ethiopia.

Several Chinese companies already have investments there, though, as yet, they have not made any substantial returns."

Photo: Short-run, quirky fashion.
Short-run, quirky fashion.
Photo: Short-run, quirky fashion.
Short-run, quirky fashion.
Photo: Premium handbags for affluent elders.
Premium handbags for affluent elders.
Photo: Premium handbags for affluent elders.
Premium handbags for affluent elders.

While price pressure is continuing to push production to increasingly exotic locales, another local trend is the use of smaller factories, either in Japan, China or further abroad. This is largely because Japanese retailers are particularly keen to avoid simply replicating styles and offering too much of a mass-market look.

Riding this particular trend was another Suzhou-based company – Suzhou Fuhaku Import and Export. Making its debut appearance at the event, the company was primarily keen to expand its OEM business. According to Sales Manager Zhu Nannan, Fuhaku works with a number of small mainland factories, most of them not substantial enough to attend a trade show in their own right.

She said: "We tend to work with smaller factories, so it would be a disproportionate cost for them to seek business in Japan directly and that's where we come in. Typically, Japanese garment orders are not large, making them unsuitable for manufacturers with a bigger capacity.

"Smaller factories also tend to be bound by fewer rules and regulations. This allows them be more flexible and more responsive to client requirements."

Such requirements, however, have long been a concern for OEM operators, many of whom feel too vulnerable to sudden market changes and too beholden to brand owners. As a consequence, many such suppliers have now begun nurturing their own brands as a buffer against such unpredictability.

One company keen to go down this route was Taiwan's MayMayTex, a veteran of Japan's OEM market. It has now launched its own brand of gym-oriented leisurewear in a stretchy but soft material, priced at about $30-50. Targetted at women of all ages who engage in gentle exercise, the range can also be used as housewear. The designs, however, are age-specific with the brighter colours and the more revealing styles reserved for younger women.

Another Taiwanese company looking to launch its own brand was the Cosda Enterprise Company. Having considerable experience in the OEM underwear sector, it has now launched a subsidiary company/brand – Le Brode – specialising in a related sector.

Explaining the thinking, Bobby Chen, the company's President, said: "Thanks to our long association with intimate apparel, we have developed something of a specialty in embroidery, leading us to create a brand that plays to that strength.

"Previously, we worked on an OEM basis for Wacoal, Triumph, and Victoria's Secret, so we have decided to use the skills we acquired – particularly our ability to create rich embroidered textures – to create a range of outer wear. Importantly, as it's a different sector, it doesn't compromise our OEM base."

"When we were just doing OEM, we couldn't market our products. So, even though we might have a really great range, if the customer didn't go for it, we ended up with no orders. Now we have decided to make finished garments and market them ourselves. This allows us to drive our business, rather than waiting on third parties."

The company's proprietary range is best described as dark, elegant and richly textured. Primarily aimed at the more mature woman – in the 30-55 age range – they retail for about $250-500, a price point considered mid-market in Japan.

Targetting an older demographic was Abiste, a Japanese bag, accessory, and costume-jewellery retailer with 170 domestic outlets. This year, the company showcased a range of handbags from the Florence-based Michelangelo brand, with prices beginning at about $1,500. With many of its outlets located in hotel lobbies, the company aims to capitalise on these "pockets of extravagance" within the Japanese market.

Outlining the company's strategy, Makiko Ishii, a member of Abiste's Product Planning and Purchasing Division, said: "We are primarily focussing on the older generation. The younger generation tend to purchase less as they lack the financial resource.

"By contrast, the more affluent older ladies have lunch in hotels and then look to purchase something in the attached boutique. They want items that will let them brighten themselves up, and that is very much our market."

Photo: Abiste: Targetting ‘pockets of extravagance’ within the Japanese market.
Abiste: Targetting 'pockets of extravagance' within the Japanese market.
Photo: Abiste: Targetting ‘pockets of extravagance’ within the Japanese market.
Abiste: Targetting 'pockets of extravagance' within the Japanese market.

Fashion World Tokyo took place from 5-7 April at Tokyo Big Sight. The event attracted a total of 21,034 visitors.

Marius Gombrich, Special Correspondent, Tokyo


Content provided by Picture: HKTDC Research
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